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The Honolulu Advertiser
Posted on: Monday, September 19, 2005

Consumers need gas excise-tax cut

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Gas consumers could indeed benefit from some reduction in state taxes collected at the pump — if it's paired with smarter shopping on their own part.

High fuel prices have spurred Gov. Linda Lingle and other Hawai'i Republicans to call for a tax cut of some kind aimed at reducing the bill customers pay. Some have called for a moratorium on the state fuel tax on gasoline.

Lingle and others correctly observe that suspending this tax would be counterproductive because it's key in securing federal highway money. Additionally, it's a tax earmarked for highways projects, and depletion of the highway fund will only hamstring efforts to restore roadways to good condition.

Investing in road repairs pays off in increased fuel efficiency and lower maintenance costs for drivers.

Instead, she is joined by others who would rather eliminate, at least temporarily, the general excise tax for gasoline sales. The excise tax is based on a percentage of the overall price, so with today's higher per-gallon rates, tax collectors have been reaping a windfall from gas consumers, many of whom are already stretching tight budgets to make ends meet.

This revenue also feeds the state general fund, which has been running a surplus and could better afford an adjustment than the highway fund.

However, the real question is whether the retailers would pass on the savings to consumers who have grown accustomed to higher prices. Would prices drift back upward, enabling businesses to pocket money formerly paid in excise taxes?

Perhaps. But surely some dealers would try to gain an edge through lower prices, hoping to capture higher-volume sales.

That means shoppers must reward savvy marketing with their business, spurring greater competition among retailers.

It could be a real boon to consumers who, surrounded on all sides by rising costs, really need a break.

It doesn't make sense to eliminate the excise tax on gasoline sales on a permanent basis. But the state should be able to find a way to avoid collecting a windfall on what everyone hopes are temporarily sky-high gasoline prices.